What A Real Bear Market Looks Like

We’ve created an S&P/Nikkei analog to compare how the current bear market is performing relative to the first month of trading after the Nikkei stock index peak on December 29, 1989.  Japanese stocks have been in an uber 30-year bear market.

At today’s close, the S&P is down 28.55 percent, 24 trading days after the February 19th closing high.  This compares to the Nikkei, which was down only 3.21 percent on the 24th trading day after its closing high.  It took Japanese stocks 62 trading days to register a similar decline, which marked a short-term low and sparked an 18.54 percent bounce lasting  45 trading days (or 9 weeks).   Similarly, stocks may be able to muster a short-term bounce right here but it will likely be met by heavy selling and not be as vigorous  as the Nikkei’s first bear market bounce.

Not Your Father’s Bear

This current bear is not your father’s bear market as the global economy has effectively shut down, unprecedented in the modern economy. There is still great uncertainty and the days are about to get much darker.  Moreover, the bursting of multiple asset bubbles, including stocks and bonds,  has caused a mass deleveraging, which, in part, explains the S&P’s rapid descent since the February high.

Multilateral Solution 

While the rest of the world is leaning on each other during this global crisis, the U.S. is becoming increasingly isolated simply due to the President’s colossal  failure of leadership.


See here for the Reuters article.

Also The Guardian,

Experts say that, while these humanitarian efforts are real, they have political ends that deserve attention. In a phone call with the Italian prime minister, Giuseppe Conte, this week, Xi said he hoped to establish a “health silk road” as part of China’s global One belt, One Road initiative, which has come under criticism from countries wary of expanding Chinese leverage and influence. —  The Guardian 

In the short-term many more Americans will die and the long-term consequence will be disastrous for America’s global standing.  Maybe that is why the market now tends to sell-off when Trump takes to the dais and issues tweets such as this,

It doesn’t take the algos long to adjust.



This morning, he referred to COVID-19 as “the Chinese virus.”

In doing so, he was retreating, like a child to his blanket, to the kind of degenerate culture-war squabble in which he feels most secure and his supporters most aggrieved. Here’s the gullibility test: When you read “the Chinese virus,” are you most offended by Trump’s insistence on racializing the pandemic, or by the administration’s cowardice and incompetence, which may kill hundreds of thousands of Americans and have already decimated the economy several times over? — The Atlantic 

Good God, this is how wars start.

Only Multilateralism Can Save Us

The current crisis is even more deserving of a multilateral response, because it presents challenges above and beyond those previous threats. In what amounts to an economic perfect storm, the pandemic has combined with preexisting recessionary pressures, the broader disruption to global trade, and a new and somewhat unexpected complication: a sharp drop in oil prices.  – Anne Krueger,  Project Syndicate

Beware Of The Bottom Callers

It’s disheartening, in our opinion, to see some calling a bottom here in stocks and that “long-term” investors should start buying.  We are not surprised, however.

It is difficult to get a man to understand something, when his salary depends on his not understanding it. – Upton Sinclair 

At the close this morning, the Nikkei is still down 57.47 percent from its December 1989 high.

We are not saying the S&P is going to replicate the Nikkei’s performance but we are saying bull markets and V-shaped recoveries are not an entitlement.



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